Vermilye & Co. v. Adams Express Company 88 U.S. 138 (1874)

U.S. Supreme Court

1. The bonds and Treasury notes of the United States payable to holder or bearer at a definite future time are negotiable commercial paper, and their transferability is subject to the commercial law of other paper of that character.

2. Where such paper is overdue, a purchaser takes subject to the rights of

antecedent holders to the same extent as in other paper bought after its maturity.

3. No usage or custom among bankers and brokers dealing in such paper can be proved in contravention of this rule of law. They cannot in their own interest by violations of the law change it.

4. It is their duty when served with notice of the loss of such paper by the rightful owner after maturity to make memoranda or lists, or adopt some other reasonable mode of reference, where the notice identifies the paper, to enable them to recall the service of notice.

5. Hence, Treasury notes of the United States stolen from an express company and sold for value after due in the regular course of business may be recovered of the purchaser by the express company, which had succeeded to the right of the original owner.

Vermilye & Co., bankers of New York, having presented to the Treasury of the United States for payment some time after their maturity eight Treasury notes issued under the authority of the Act of March 5, 1865, were informed that the Adams Express Company asserted an ownership of the notes, and that they could not be paid until the question of the rightful ownership was settled.

The matter resulted in a bill of interpleader, filed by the United States in the Circuit Court for the Southern District of New York, against both the express company and Vermilye & Co., to which they filed their respective answers, the notes being deposited with the clerk of the court of abide the event of the suit.

The notes in controversy, to-wit, five of $1,000 each, and three of $100 each, came to the possession of the express company to be forwarded for conversion into bonds of the United States, and were started on their way from Louisville in custody of their messenger on the 22d of May, 1868. Shortly after leaving Louisville, the car on which were the messenger and the notes, was stopped and entered by robbers, who, after knocking the messenger down and leaving him for dead, carried off the safe containing these notes, which was found the next day broken open and without the notes in it. The express company, as soon as it could obtain

the numbers and other description of the stolen notes, advertised extensively the loss in the newspapers, gave notice at the Treasury Department, and entered there a caveat against their payment or conversion into bonds to anyone else, and gave notice to the principal bankers and brokers of the City of New York of the loss and their claim on the notes. On the 29th of May and the 5th of June, respectively, the express company delivered notices to persons behind the counter of Vermilye & Co., at their place of business, which notice sufficiently described the lost notes, cautioned all persons from receiving or negotiating them, and asserted the claim of the express company to the notes. The company paid the owner of the notes, who had delivered them to the company for transportation, and appeared to have done all that could be done to assert their rights in the premises.

On the 9th and 12th days of April, 1869, Vermilye & Co. purchased these notes over their counter at fair prices in the regular course of business and forwarded them to the Treasury Department for redemption, where they were met by the caveat of the express company.

As already stated, these notes were issued under the Act of March 3, 1865. [Footnote 1] That statute authorized the Secretary of the Treasury to borrow on the credit of the United States any sums of money not exceeding six hundred millions of dollars, for which he should issue bonds or Treasury notes in such form as he might prescribe. It also authorized him to make the notes convertible into bonds and payable or redeemable at such periods as he might think best. Under this statute, the notes in controversy were issued, payable to the holder three years after date, and dated July 15, 1865, bearing interest payable semiannually, for which coupons were attached, except for the interest of the last six months. That was to be paid with the principal when the notes were presented. On the back of the note was a statement, thus:

bonds, redeemable at the pleasure of the government at any time after five years, and payable twenty years from June 15, 1868, with interest at six percent per annum, payable semiannually, in coin."

At the time of the purchase of the notes by Vermilye & Co. more than three years had elapsed from the date of their issue, and the Secretary of the Treasury had given notice that the notes would be paid or converted into bonds at the option of the holder on presentation to the department, and that they had ceased to bear interest.

On the hearing, Vermilye & Co. brought several witnesses, bankers and brokers, to show that notes of the sort here under consideration continued to be bought and sold after they had become due and interest had ceased thereon; that it was not customary for dealers in government securities to keep records or lists of the numbers or description of bonds alleged to have been lost, stolen, or altered, or to refer to such lists before purchasing such securities; that, in their judgment, it would be impracticable to carry on the business of dealing in government securities if it were necessary to resort to such lists and make such examination previous to purchase; and that the purchase of the notes in controversy by Vermilye & Co. was made in the ordinary and usual mode in which such transactions are conducted.

Some testimony was given on the part of the express company to show an endorsement by the owner on certain of the notes, existing when they were stolen -- "Pay to the order of the Secretary of the Treasury for conversion" -- but this endorsement, if then existing, was not now visible on ordinary inspection. And on their face the notes remained payable "to bearer."

The court below held

1st. That there was nothing in the evidence about endorsement which could restrict the negotiability.

2d. That the notes were on their face overdue, and that the ordinary rule applicable to such notes -- viz., that the person taking them took them with all the infirmities belonging to them -- applied, though the notes were securities issued

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